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SEGMENT REPORTING
 9 Months Ended
Sep. 30, 2023
Segment Reporting [Abstract]  
SEGMENT REPORTING
12. SEGMENT REPORTING
The Company’s operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics and have similar business activities.
The Company has two operating segments: “Hosting”, which consists primarily of its blockchain infrastructure and third-party hosting business; and “Mining”, consisting of digital asset mining for its own account. The blockchain hosting business generates revenue through the sale of consumption-based contracts for its hosting services which are recurring in nature. During 2022, our “Hosting” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales”. The Mining segment generates revenue from operating owned computer equipment as part of a pool of users that process transactions conducted on one or more blockchain networks. In exchange for these services, the Company receives digital assets.
The primary financial measures used by the chief operating decision maker (“CODM”) to evaluate performance and allocate resources are revenue and gross profit. The CODM does not evaluate performance or allocate resources based on segment asset or liability information; accordingly, the Company has not presented a measure of assets by segment. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company excludes certain operating expenses and other expenses from the allocations to operating segments.
The following table presents revenue and gross profit by reportable segment for the periods presented (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Hosting Segment
Revenue:
Hosting revenue$29,848 $44,916 $82,307 $117,066 
Equipment sales— 37,161 — 78,660 
Total revenue29,848 82,077 82,307 195,726 
Cost of revenue:
Cost of hosting services24,882 44,975 64,187 119,850 
Cost of equipment sales— 27,917 — 63,993 
Total cost of revenue24,882 72,892 64,187 183,843 
Gross profit
$4,966 $9,185 $18,120 $11,883 
Mining Segment
Revenue:
Digital asset mining income$83,056 $80,495 $278,164 $323,337 
Total revenue
83,056 80,495 278,164 323,337 
Cost of revenue:
Cost of digital asset mining72,603 116,756 212,125 279,576 
Total cost of revenue72,603 116,756 212,125 279,576 
Gross profit (loss)
$10,453 $(36,261)$66,039 $43,761 
Consolidated
Consolidated total revenue
$112,904 $162,572 $360,471 $519,063 
Consolidated cost of revenue
$97,485 $189,648 $276,312 $463,419 
Consolidated gross profit (loss)
$15,419 $(27,076)$84,159 $55,644 
For the three months ended September 30, 2023 and 2022, cost of revenue included depreciation expense of $1.9 million and $3.3 million, respectively for the Hosting segment. For the three months ended September 30, 2023 and 2022, cost of revenue included depreciation expense of $22.0 million and $61.1 million, respectively for the Mining segment.
For the nine months ended September 30, 2023 and 2022, cost of revenue included depreciation expense of $3.7 million and $8.2 million, respectively for the Hosting segment. For the nine months ended September 30, 2023 and 2022, cost of revenue included depreciation expense of $60.8 million and $146.8 million, respectively for the Mining segment.
Concentrations of Revenue and Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Credit risk with respect to accounts receivable is concentrated with a small number of customers. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, in order to limit the exposure to credit risk. As of September 30, 2023 and December 31, 2022, all of the Company’s fixed assets were located in the United States. For the three and nine months ended September 30, 2023 and 2022, all of the Company’s revenue was generated in the United States. For the three and nine months ended September 30, 2023, 74% and 77%, respectively, of the Company’s total revenue was generated from digital asset mining of bitcoin, which is subject to extreme price volatility. As of September 30, 2023, substantially all of our digital assets were held by one third-party digital asset service. As of December 31, 2022, substantially all of our digital assets were held by two third-party digital asset services.
For the three and nine months ended September 30, 2023 and September 30, 2022, the concentration of customers comprising 10% or more of the Company’s total revenue are as follows:

Three Months Ended September 30,Three Months Ended September 30,
2023202220232022
Percent of total revenue:Percent of Hosting segment revenue:
Customer
E (related party)1
N/A23 %N/A46 %
F2
12 %N/A45 %N/A

Nine Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Percent of total revenue:Percent of Hosting segment revenue:
Customer
E (related party)1
N/A16 %N/A42 %
F2
11 %N/A48 %N/A
1 This customer was labeled as Customer A in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. The label was updated to conform to the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
2 This customer was labeled as Customer D in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.
A reconciliation of the reportable segment gross profit to loss before income taxes included in the Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022, is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Reportable segment gross profit (loss)
$15,419 $(27,076)$84,159 $55,644 
Gain from sales of digital assets
363 11,036 2,358 25,007 
Impairment of digital assets(681)(7,986)(2,864)(212,184)
Impairment of goodwill and other intangibles— (268,512)— (1,059,265)
Impairment of property, plant and equipment— (59,259)— (59,259)
Losses on exchange or disposal of property, plant and equipment(340)— (514)(13,057)
Operating expenses:
Research and development
2,253 6,192 5,308 24,305 
Sales and marketing
1,041 39 3,133 11,675 
General and administrative
23,511 43,346 69,671 174,380 
Total operating expenses
26,805 49,577 78,112 210,360 
Operating (loss) income
(12,044)(401,374)5,027 (1,473,474)
Non-operating expenses, net:
Gain on debt extinguishment
(374)— (21,135)— 
Interest expense, net
2,196 25,942 2,317 74,734 
Fair value adjustment on convertible notes— (4,123)— 186,853 
Fair value adjustment on derivative warrant liabilities— (521)— (32,985)
Reorganization items, net28,256 — 78,270 — 
Other non-operating (income) expenses, net(1,090)1,478 (3,978)4,997 
Total non-operating expenses, net
28,988 22,776 55,474 233,599 
Loss before income taxes
$(41,032)$(424,150)$(50,447)$(1,707,073)